The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

The ERC is a refundable payroll tax credit available to eligible employers whose operations were fully or partially suspended due to a COVID-19 shutdown. Employers may be eligible for the ERC if its gross receipts for a calendar quarter decline by a certain percentage when compared to a prior calendar quarter. This safe harbor permits employers to exclude certain stimulus proceeds from gross receipts from programs such as:

• The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan
• Shuttered Venue Operators Grants 
• Restaurant Revitalization Grants under the American Rescue Plan Act of 2021

The ERC is available for qualifying wages paid after March 12, 2020 and before January 1, 2022. An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return. An employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

Please be sure to contact a qualified tax advisor for your particular situation and how to claim the ERC on your employment tax return. Contact Chase Law Group if you ever need a recommendation.